We are still positive on equities and suggest investors to maintain equity allocation in SAMVAT 2078 as per their long-term strategic asset allocation, Raghvendra Nath, Managing Director, Ladderup Wealth Management said in an interview with Zeebiz’s Kshitij Anand.
He brings with him more than 21 years of corporate experience, out of which 15 years were in the mutual fund industry, and deep knowledge of the financial markets. He was earlier the chief marketing officer at Birla Sun Life AMC Ltd. Prior to that he also headed the Strategy and Business Development team at BSLAMC.
Q) On this the auspicious festival of Diwali what should be the ideal investment strategy or the allocation plans for the next SAMVAT?
A) Ideally, the asset allocation should not be based on forecasts for the next Samvat but on long-term strategic asset allocation depending on the risk profile and investment horizon.
However, considering that the economy is in an expansionary stage and coming out of one of the worst pandemics in human history, there is a good likelihood that Equities may continue to do well.
While the markets have already rallied on a valuation basis are trading slightly above their long-term averages, we are still positive on equities and suggest investors maintain equity allocation as per their long-term strategic asset allocation.
Q) What is your view on markets which are already trading near record highs? What would you advise to someone who has an investment horizon of about 10 years?
A) It is true that the markets are at record highs right now but that does not mean that they cannot go higher. Sensex or Nifty is just a derived number of how the underlying stock prices are doing.
There are scores of companies that have an excellent outlook for the next 5 to 10 years in terms of business growth as well as in Equity markets in the long term that is what matters.
The stock prices shall always be determined by the intrinsic value of the company that in turn is driven by its potential for growth. For someone who has a long-term horizon, he should invest regardless of where the markets are today as Equities have never disappointed investors in long term.
It is irrelevant at what level are you entering the market. What is relevant is what you are buying in the market.
Q) What do HNI prefer the most mutual funds or AIFs for wealth creation?
A) Both mutual funds and AIFs are investment vehicles that help investors to invest in the different asset classes. Generally, a High-Net-worth Individual (HNI) investor, use both investment vehicles.
AIF platform provides wider choice asset classes to invest in comparison mutual funds. Asset classes like venture capital, private equity pre-IPO, private credit and hedge funds. Also, a certain category of AIFs can use leverage. Therefore, all these features along with greater flexibility on the fee and charges make these instruments attractive for an HNI.
See Zee Business Live TV Streaming Below:
Q) How instead of purchasing real estate directly, HNIs are choosing to invest in REITs to gain the necessary exposure to the asset class?
A) Real Estate Investment Trusts, i.e., REITs are investment vehicles that own income-generating real estate assets. REITs provide an investment opportunity to even retail investors through listing on the stock exchanges to access and benefit from valuable large income-generating real estate assets.
REITs generally have a portfolio of commercial real estate assets and the units of a REIT earn a share of the income generated.
Hence, REITs have become an attractive and efficient instrument for investors to enjoy the benefits of the real estate assets without actually having to physically own and manage the property.
Q) Recently, SEBI has struck a word of caution against digital gold. What could be the rationale, and do you think it will have any impact on the investment product?
A) SEBI has barred investment advisors from advising on products like digital gold as these are unregulated products, and hence the structure of these instruments are not approved by the regulator.
We believe SEBI has taken this step to protect the interest of the investors as these are unregulated products, there is a much higher element of risks involved. It would be prudent for investors to invest in regulated products only.
Q) What are the trends you are seeing post the pandemic? Has succession, wealth management have become popular avenues?
A) Covid pandemic has brought big changes in investor behaviour, apart from shifting the focus to health-related risks, because of the uncertain and volatile environment, the investors have become more aware about the risks related to the succession of their wealth and businesses.
Hence, succession planning has become an important part of risk management strategy to ensure the smooth inter-generational transfer of wealth to the intended beneficiaries.
Q) Should one maintain a substantial exposure to debt investments to hedge? What are your views?
A) Debt investments are considered safe investments in comparison to equities, as these debt instruments are relatively less volatile and can be a source of regular income in the form of interest.
With the opening of the economy, inflation globally has risen due to the rise in commodity prices including a sharp rise in crude oil and gas prices.
In case the elevated inflationary scenario persist and central banks ignore inflation as being transitory in support of growth, this may result in a longer period of negative real interest rate environment in turn hurting the fixed income investors.
We believe each individual investor should have long-term strategic asset allocation depending on his/ her risk profile and investment horizon.
(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)